The falling bull reached a great height this time, bringing cheer to India’s niche art market. Indian modernist Tyeb Mehta’s Untitled (Falling Bull) sold for $2.8 million (Rs 17.54 crore, the pre-sale estimate was between $1.4 million and $2 million) at Christie’s Mumbai auction last month. When another modern master, Vasudeo S. Gaitonde’s abstract aquamarine painting fetched $1.06 million at the same auction, the art community across the hitherto subdued domestic market suddenly found reason to be optimistic. It was Christie’s second sale in the country, and the London-based auction house mopped up $12 million.

It was a strong showing, though Christie’s did better in 2013 when it earned $15.4 million, more than double the pre-auction estimates, and sold a Gaitonde (Untitled, an oil on canvas) for $3.7 million—the highest price ever paid in India for a modern work of art and an auction record for the artist. Could the auctions portend a turnaround, lifting the domestic market after the downturn?

Compared with the $3.5 billion Chinese market, India’s art market is nascent, but contemporary art boomed during 2004-08 as speculators bet on it as a handy investment option. “The boom was an illusion that people created to make short-term gains,” says Neha Kirpal, founder and fair director of India Art Fair, an annual art exhibition that has been held in Delhi since 2008.

“A few players, a few auction houses, and a few art funds came along and realised that they could raise a lot of money from the market by giving people very promising returns.” They did, but not for long. When the downturn came, buyers turned away from new acquisition, prices plummeted, art funds shut shop, and thousands lost money.

Even in the days of crazy, spiralling prices, Christie’s didn’t gun for a piece of the local market although it had held international sales of Indian art in London and New York, and its Indian client base had reportedly increased fourfold. It’s been operating in India for two decades now (the first office was set up in Mumbai in 1994) but has got bullish about the market only recently—holding live auctions for the past two years and setting up a second office in Delhi.

“The market is maturing. There are many serious buyers at home who appreciate Indian art and go for good pieces for their personal collections, unlike art funds or asset management companies that put the works back into the market,” says Deepanjana Klein, international head for Indian modern and contemporary art at Christie’s.

Christie's is leveraging that shift in sentiment. According to media reports, a study conducted by the auction house showed that local auctioneers Pundole’s, Saffronart, and Astaguru had reported a joint turnover $7.4 million in the first six months of 2013. The first India sale by Christie’s was held in December that year and toppled a few records, preparing the ground for the second one last year.

Till Christie’s came along, ultra-wealthy Indians had the money but no world-class art sales near home that encouraged them to spend really big. Now, with the Christie’s stamp and its active market push, there’s a perceptible rise in buyers’ confidence, prices are soaring, and more people are buying high-value art.

In the first India auction, 35% of the buyers were new registrants to Christie’s. A year later, confidence in the Indian art market was 34% higher and stood at 79 (the highest reading since November 2007), according to ArtTactic, an art market research firm. Amin Jaffer, international director of Asian art at Christie’s, summed it up best when he told the media, “The reason we have come here is we have seen very active bidding out of India. We’ve seen an expansion in the range of interest.”

“The bottom line is that Christie’s finally sees merit in the local market, and that boosts interest among buyers,” says Kirpal.

Paul Hewitt, managing director for growth markets at Christie’s, feels the mood will sustain. “We can’t afford to not be here,” he says. “Earlier, the Indian currency was weaker. The political and economic outlook, too, was unstable.”

Interestingly, big-ticket markets in the world of art are defined by how many collectors can (and will) spend $1 million for a piece. Europe and the U.S., the two biggest markets, have hundreds of such collectors. China has more than a hundred of them. (The first Christie’s auction in China was held in 2013, raking in $25 million.) Indians don’t buy as aggressively, but there’s enough potential for the art business to expand in the subcontinent, feels Hewitt.

A close look at other BRIC markets explains Christie’s stakes in India. In Russia, most powerful buyers (read the oligarchs) prefer to spend fabulous amounts on Western art. Although Russian masterpieces continue to command massive prices (Valentin Serov’s Portrait of Maria Zetlin fetched more than $14 million in November), there is little support for home-grown contemporary art. That could be one reason why Christie’s has never held a live auction in the country in spite of being there for nearly two decades and opening an office in Moscow in 2010. The collapse of the rouble, which has lost 45% of its value against the dollar in 2014, is only likely to worsen the market. As for Brazil, Christie’s is yet to do a live auction in that country even though works of Cândido Portinari and Beatriz Milhazes have crossed the million-dollar mark.

SOME FEEL CHRISTIE’S is taking too few risks in India by banking mainly on well-known modern masters and national treasures. (It sold 12 such pieces in the last auction, including a pocket notebook of Rabindranath Tagore that fetched more than $330,000, four times its pre-sale estimate and the highest price for a manuscript sold in India.)

Others like Peter Nagy—who set up Gallery Nature Morte in Delhi, Gurgaon, and Berlin—are making bolder bets. “The market is still facing difficulties, but we have decided to showcase younger artists,” he says. Nature Morte has seen a 25% increase in turnover over the past year.

Dinesh Vazirani, co-founder of the online auction house Saffronart, seconds the strategy. “The market [for contemporary art] is in a healthy state. A lot of the people who cannot afford to buy modernists are turning to younger artists,” he points out.

Today, contemporary art accounts for about 10% of Indian art auction sales globally (a steep fall from 41% when the market was at its peak in 2008). But consumer confidence in this segment has gone up to 67, according to ArtTactic—a sharp rise from 38.9 in November 2013.

To fast-track growth, the Indian art market must shed its conservatism. A bigger impediment is the lack of government support. While China has a stated ambition of generating 5% of GDP from “culture” and boasts more than 4,000 museums, out of which 3,500 are state-run, “in India we don’t even have an international venue that can host a standard exhibition”, rues Kirpal. She had to move India Art Fair out of Delhi’s Pragati Maidan because there was a leak when it rained. “Culture,” observes Nagy, “has to be an integral part of society.” Read that as stopping lip service and giving a free run to the bull.

Follow us on Facebook, Twitter, YouTube & Instagram to never miss an update from Fortune India. To buy a copy, visit Amazon.